Positive side of Covid -19 – Savings under new normal post covid-19
The covid-19 pandemic situation has created not only unprecedented health crises across world but has also impacted financial situation of many individuals. The nation-wide lockdown, pay cuts, job losses, significant erosion in wealth in downfall market etc have put many people under tremendous pressure. Surviving the covid-19 pandemic fiscally has become a big marathon like race between earning, spending and savings. The pandemic has forced the people to reconsider their financial situation and priorities.
Under such scenario it has become a very big question as how can you manage your finances in these trying times?
To begin with, wealth planning in such times becomes a major task. Such situations call for reconsidering your earlier financial decisions and plans. This adds to the stress levels of many individuals but do not react to the stress with impulsive decisions. You need to give introspective thought on your spending vis-à-vis savings out of your changing priority of spending in this covid-19 situation.
It is imperative to identify your assets and liabilities that you currently hold and recalculate the trade-off between expected return from your present net worth and the expected cost of financial obligations on your liabilities in view of revised interest rates. Repay debt if the cost exceeds your expected return. Opt for moratorium only if your income source drastically impaired.
Do not panic about your financial situation, instead you need to self-assess and evaluate your financial situation and take decision calmly. List out all the expenditure which you otherwise spend in normal situation, evaluate them to priorities the most needed or essential expenses and expenses of less priorities or that can be postpone later and expenditure that can be cut down. The least one you can do at present is to spend less.
At the same time, also list out your total savings so far and where they are invested. Evaluate your current net worth identifying fixed investments maturing at different tenure, investment which currently value more than its initial value and can be liquidated easily with or without cost, and investment which are less than its initial cost, investment in Gold, property etc. This would help you to overcome fear and anxiety in the current panic situation and have proper planning to your standing commitment and savings that can be made.
It is important to adapt to how you can spend the money rightly. You need to look for where you can minimise your spending and maximise your savings out of impaired earning source. This is where you need to understand the smart spending concepts. You need to curb out all the less important expenditure until you come out stronger from these crises.
Next, do not cut down indiscriminately your current financial commitments – be it investments or plans. Take help of certified financial adviser. A financial planner would systematically analyse your situation with alternative solution and come up with the best suggestions to salvage the situation.
Now, since the economy is gradually opening up with many unlock measures, how to improve finances?
Investing during a recession sounds to be futile to most of the people but it gives realty check to your financial goals. Some important things to keep in mind while investing in severe conditions like the present one are:
Do not give up your SIP: Investing through systematic Investments plan offers the great stability to your investments against volatility and usually survives well through tough time. Hence it is advisable not to stop your SIPs.
Evaluate before you invest: Not all investment plans are meant for uncertain periods. It is better to opt for plans that are less volatile. Such plans tend to have great stability. Try to make fundamental study of the plans or funds you presently hold on your portfolio. Consult some professional financial advisor where required for right advise.
Try to save more: Importance of savings becomes more apparent during such crises. That is why you should try to save more even through this crisis.
One of the known survey reports released by bank bazar on 9th June showed that people have become more conservative when it comes to their financial priorities, with discretionary spending falling, and saving, investing and loan repayment rising to the top of the list. It showed that Indians are worrying most about their financial future and focussing more on their savings due to covid-19 pandemic. Read more on survey
Do not lose hope. Remember regular and discipline approach to the investment would always lead to exceptional results. Invest less but regularly this would completely neutralise the effect of cyclical ups and downs in the economy. It is always possible to sustain and improve your finances during tough situation.
Positive side of Covid-19: The most positive effect of covid-19 has tweaked savings and spending habits among people. People realised how little they actually need and how much they want. Certainly, on positive side covid-19 has left over for more savings in individual hands as like staying at home is the savings you accrue on outdoor travel, entertainment, beauty and hair salons, eatouts, fuel, clothing, high lifestyle spending etc – you all know the rest!
Why not to put this virtual savings in reality? You can choose to park the idle money into liquid fund to make stronger contingency plan or put an additional lumpsum amount in existing fund or new funds or enhance the SIP by saving that much amount every month post covid-19 for another couple of year. That way a tidy amount of savings can make you reach faster to your financial goal.
Mean while stay safe and take care
